A rise in the charge in taxation for 2015 to $35 million, from $3 million in 2014, eroded the 20 percent gain in gross premium income, JN Life Insurance realized, for the year ended December 2015.
Premium income amounted to $352 million from $294 million for the prior period leading to net premium income of $292 million for an increase of percent over the $250 million netted in 2014.
Operating cost and net insurance benefits increased from $155 million to $184 million an increase of 19 percent, just a shade lower than the increased premium income.
The tax rate increase resulted from the introduction of a corporate income tax last year March that replaced premium and investment taxes at rates of 3 percent and 15 percent respectively. Thus the effective corporate tax rate for JN Life for 2015 was 26 percent of pre-tax profit in contrast to 2.4 percent for 2014.
Although profit before tax increased from $118 million to $135.5 million profit after tax fell from $115 million in 2014 to $100 million, due to the increased tax.
While profits declined moderate total assets grew 36 percent year-on-year from $355 million to $481 million. Investments, which were mainly in BOJ certificate of deposits and government notes, increased by 31 percent over the $293 million reported for 2014 to $384 million.
Tax impairs Jn Life profit
Stocks & Securities dump repos
Stocks & Securities (SSL) dumped their repo business and sold it to Jamaica National Building Society. Mark Croskery, Managing Director of SSL, said this is in keeping with the trend in the industry where financial institutions are reducing their exposure to this business.
The two government debt swaps (JDX) have brought into full focus the risk that is inherent in the business. The sharp swings that have taken place in interest rates has resulted in major changes to the value that companies book in their financial statements. Such risk means that these entities need to have a greater level of capital to withstand the potential losses that can occur.
Croskery stated that SSL has applied for a unit trust license, which they hope will be approved for later in the year. They expect to enter the market for money market offerings using unit trust vehicle.
The amount of the sale was not disclosed but at the end of 2011, SSL had $4 billion on their books. However, a source suggests that the amount may have declined to a much lower figure. With such sums and with the interest rates as low as they are, making a decent profit from the repo business is marginal. Interestingly, Croskery stated that there would be no staff changes as a result of the sale.
The sale is likely to provide capital for the company and strengthen its balance sheet.
SSL customers were recently advised that the company would no longer be offering these instruments.